HW week 12 CH 12 #9 #10.docx

HW week 12 CH 12 #9 #10.docx - 9 Angela and Thomas are...

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9. Angela and Thomas are planning to start a new business. Thomas will invest cash in the business but not be involved in day-to-day operations. Angela plans to work full-time overseeing business operations. The two currently project that the business will generate $200,000 of annual taxable income before consideration of any payments to Angela for her services. Both agree that Angela’s services are worth $100,000. Angela and Thomas plan to form a passthrough entity but are unsure whether to choose a partnership or an S corporation. In either case, they will be equal owners of the entity. Given their other sources of income, both Thomas and Angela have a 39.6 percent marginal tax rate on ordinary income. (Ignore any payroll or self-employment tax consequences.) a. If the business is operated as a partnership, calculate ordinary income allocated to each owner and explain the treatment by the partnership and by Angela of her $100,000
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  • Fall '15
  • monroe
  • Progressive Tax, Corporation, Taxation in the United States, Angela

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